Microsoft Targets Budget Smartphone Segment After Jobs Cuts

Stephen Elop says Microsoft will go after the budget end of the smartphone market after announcing jobs cuts.Reuters

Microsoft has just announced the largest jobs cull in the company's history and has revealed that it will focus on the budget end of the smartphone market in order to grow its market share.

While CEO Satya Nadella outlined in broad strokes what the jobs cuts will mean, Stephen Elop, executive vice president of Microsoft's Devices & Services business unit, has also published a memo sent to Microsoft's employees which outlines exactly what the changes will mean for the company's smartphone division.

Of the 18,000 job cuts that will happen this year, the majority (12,500) will come from the Nokia division of which Elop was CEO until Microsoft's acquisition which was completed earlier this year.

"It is particularly important to recognise that the role of phones within Microsoft is different than it was within Nokia. Whereas the hardware business of phones within Nokia was an end unto itself, within Microsoft all our devices are intended to embody the finest of Microsoft's digital work and digital life experiences, while accruing value to Microsoft's overall strategy."

End of Nokia X

To this end, Elop says that going forward the company will look to make the market for Windows Phone and to do this it will "drive Windows Phone volume by targeting the more affordable smartphone segments."

While the shift in strategy suggests those phones will have a short shelf life, Elop said: "We expect to make this shift immediately while continuing to sell and support existing Nokia X products."

Windows Phone currently has a 4% share of the smartphone market which is dominated by Android and iOS. While there are some other manufacturers making smartphones running Microsoft's mobile operating system, it has been Nokia which has almost entirely driven the relative success so far.

Consolidation

Addressing the higher-end of the market, Elop said that he would be looking to leverage the expertise of Microsoft's other divisions to give them an advantage over the likes of Apple, Samsung and LG.

The changes will also see the consolidation of the former Smart Devices and Mobile Phones business units into one phone business unit which will be responsible for all phone efforts. Jo Harlow will take control of this new division within Microsoft which Elop says will be "responsible for the success of our Lumia products, the transition of select future Nokia X products to Lumia and for the ongoing operation of the first phone business."